Do you want to boost your mortgage chances to qualify for a homestead?
If you want to get onto the property ladder, then it could feel like you’re about to climb Everest with all that you may have to face. But in reality, getting approved for a mortgage isn’t as tricky as you may think. Plus, there are plenty of ways that can help you to improve your chances of getting a mortgage and buying property. For example, even if you have bad credit, you will be able to loan money from a bank with the best options in Canada and other locations – so this is something to consider if you are worried about buying a home while having a bad credit score!
Of course, the way to get approved for a mortgage is all about who will lend you the money. And if you have some debt already or a bad credit score, then not all lenders will want to lend to you. But the thing is, it’s okay; someone will.
So here are the best ways to boost your mortgage chances of getting on the property ladder and getting the deal that you want and need.
This post is part of a series of posts for getting started at homesteading. See the Getting Started section to read other posts in this series.
Boost Your Mortgage Chances
Check Your Credit Score
One thing that a bank or lender is going to do is to check your credit score. So you need to know what it is and what you’re dealing with before you apply. There are various sites online, like freecreditscore.com where you can check what it is. So being aware is the first step, then analyzing it closely is the second step. If there are any errors, then make sure that they are corrected sooner rather than later.
When you have questions about something on your credit report, ask for an explanation immediately. If you feel that an entry on your credit report is inaccurate then feel free to file a dispute for each entry you are in question with. Every credit reporting agency has a means for you to file a dispute.
Filing a dispute or asking for proof of being your debt will not hurt your credit score, if anything, it can help, especially if it is truly incorrect.
Finding out about issues on your credit ahead of time can save you tons of potential embarrassment when applying for a mortgage. Be aware of what is on your credit report and expect to have answers if the bank you are applying to has questions. This is one of the best ways to boost your mortgage chances.
Even if your credit score isn’t perhaps the best, there are still options out there for you. There are specialist mortgage brokers for bad credit that are available to help you get funding while your credit score is not quite what traditional mortgage lenders look for when approving these loans. These brokers will take the time to listen to your situation and get a fuller picture of you and your finances before working to secure you the best mortgage possible.
Don’t Apply For Credit Before a Mortgage
Lenders will go through your finances with a fine tooth comb. They will check what all payments in and out are.
So if they see you have got a lump sum shortly before applying for the mortgage or worse, their records will show that you applied for a new credit card or loan a couple of months before the mortgage, then it can be detrimental to your application.
Lenders need to know you’re going to be reliable and able to pay them back. If they know if you’ve got a lot of credit cards or loans that you’ll also be paying back, then your reliability decreases. This is known as your debt to income ratio.
Basically, and each lender may be different, how much you make in income monthly should be a certain percentage more than what you pay out. If the lender feels it is too high, they can refuse to loan the money.
Consider Using a Guarantor
If you have pretty bad credit and won’t have much cash for a deposit, then you could look into guarantor loans instead of a traditional bank loan.
Basically, instead of having the deposit upfront, a guarantor will need to sign the loan agreement to say that they will pay if you can’t. Then as long as the lender gets paid, they don’t really mind who it comes from. Some people call this a cosigner. Many times a parent will act as a guarantor on their children’s behalf.
So a site like guarantor.loan could help if you wanted to look into this further. Just make sure that you and the guarantor both know what you’re getting yourselves into!
Always read the contract before you sign anything.
Manage Your Available Credit
Managing your available credit is all about how much credit you currently have available to you from cards to loans and overdrafts. Reaching the right balance is important, as lenders don’t want to see that you have too much, but also don’t want to see that you don’t have any.
Not having any available credit could indicate that you may not be able to make repayments on time. Using around half of your available credit is a good idea. You don’t want to show that you’re maxed out on cards.
Find a balance between having a lot of available credit and none at all. Then you can have the lender consider your application for a mortgage.
A Final Note
Don’t get discouraged if you can’t qualify right away. Times are tough and some lenders are pretty strict on their requirements. This does not mean you can’t buy the homestead of your dreams. Learn the ways to boost your mortgage chances before you start the process.
Get your credit cleaned up, watch those available balances, and only spend what you need to. Then consider a guarantor, and try to keep your debt to income ratio at a good percentage. If you follow these guidelines, you too can purchase your dream homestead.
Do you have any advice or tips for those looking to secure a mortgage? Please enter your comments in the box below.